More Evidence of Subdued Inflation

October 13, 2017

The dollar fell overnight by 0.7% against the Australian dollar, 0.6% relative to the kiwi, 0.4% versus the yen and sterling, 0.3% vis-a-vis the Swiss franc, 0.2% against the euro and 0.1% versus the yuan. The peso and loonie remained unchanged even as President Trump suggests that it may not be possible to fix the NAFTA treaty in which case such would be abandoned.

The U.S. president is upping the ante on other contentious issues as well. By executive order, he’s removing federal subsidies to healthcare insurers, a step that’s likely to render Obamacare unworkable and cause premiums and uninsured people to rise sharply. He’s threatening to not recertify the Iran nuclear treaty, putting the onus on the Congress to make changes if U.S. participation in the deal is to continue. A preemptive and unilateral U.S. military strike against North Korea appears under consideration even as reports surface that the North Korean test in early September may have damaged its launch site, setting back the program. Verbal attacks continue against the U.S. press, NFL, and other domestic critics continue.

Stocks rose 1.0% in Japan, 0.8% in India and 0.5% in Singapore, and 0.3% in New Zealand and Australia. Most European markets are barely changed, and U.S. markets opened marginally higher.

The ten-year German bund, U.S. Treasury, and British gilt yields slipped by 4, 3, and 2 basis points overnight.

West Texas Intermediate crude oil recovered 1.9% to $51.57 per barrel. Comex gold rose 0.5% to $1,302.70, and the price of a bitcoin touched another record high.

U.S. consumer prices rose 0.5% last month and accelerated to a 2.2% 12-month rate of increase (most since April), but these gains were 0.1 percentage point less than forecast. Core CPI behaved similarly, edging only 0.1% higher on month and remaining unchanged at a 1.7% on-year change for a fifth straight time. Three-fourths of the total monthly CPI increase was caused by a 13.1% leap in gasoline. real average weekly earnings dipped 0.1% in September, the second monthly decline in a row, and posted a smaller 0.6% on-year advance, which was the least gain since May.

German CPI inflation stayed level at 1.8% in September. The monthly 0.1% uptick also matched August’s outcome. Energy prices climbed 1.2% on month, but services fell by 0.5%. Core CPI dipped 0.1% on month and rose 1.5% on year.

Italian consumer prices slid 0.3% on month and were just 1.1% higher than in September 2016. Finnish consumer prices recorded on-year growth of 0.8% in September. Polish inflation picked up 0.4 percentage points to 2.2% last month.

Greek import prices were unchanged between July and August.

Swiss domestic producer prices fell 0.2% on year in September, but the combined PPI/import price index recorded a 0.8% 12-month increase due to a 2.9% increase in the import price component.

Other data releases today showed

  • A six-month low in China’s trade surplus of $28.50 billion caused by a greater-than-forecast 18.7% on-year surge in imports juxtaposed against an 8.1% rise of exports.
  • A strong 0.9% third quarter-over-second quarter advance in U.S. retail sales associated with a 3.9% increase compared to the third quarter of 2016. Excluding motor vehicles and parts, sales rose 4.1% on year in 3Q and by 4.6% in September. September sales were 1.6% greater than in August.
  • Real GDP in Singapore accelerated to an 0n-year pace of 4.6% last quarter from 2.9% in the second quarter.
  • Dutch retail sales posted on-year growth in August of 4.4%.
  • Germany had 9.8% fewer corporate insolvencies in July than a year before.
  • New Zealand’s factory purchasing managers index dipped to a 2-month low of 57.5 last month from a 3-month high of 57.9 in August.
  • Japanese on-year M2 money growth was 4.1% in September, which was similar to growth of 4.0% both in the whole third quarter and full-2016.
  • The Reuters/U. Michigan index of U.S. consumer sentiment leaped to 6.0 points to 101.1 in October, its best level since the start of 2004 and well above a recent 7-month high of 96.8 set in August.

Peru’s central bank policy rate, which earlier this year had been cut in May, July and September, was left unchanged at 3.5% at the latest monthly Board meeting.

President Trump will be delivering a speech shortly after mid-day on Iran and other items of keen interest. This may upstage news from today’s start of a semi-annual IMF/World Bank meeting also in Washington.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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